Correlation Between Cofco Biochemical and Shanghai Metersbonwe

Can any of the company-specific risk be diversified away by investing in both Cofco Biochemical and Shanghai Metersbonwe at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cofco Biochemical and Shanghai Metersbonwe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cofco Biochemical Anhui and Shanghai Metersbonwe FashionAccessories, you can compare the effects of market volatilities on Cofco Biochemical and Shanghai Metersbonwe and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cofco Biochemical with a short position of Shanghai Metersbonwe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cofco Biochemical and Shanghai Metersbonwe.

Diversification Opportunities for Cofco Biochemical and Shanghai Metersbonwe

0.58

Correlation Coefficient

Cofco Biochemical  Shanghai Metersbonwe

Very weak diversification

The 3 months correlation between Cofco and Shanghai is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Cofco Biochemical Anhui and Shanghai Metersbonwe FashionAc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Metersbonwe and Cofco Biochemical is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cofco Biochemical Anhui are associated (or correlated) with Shanghai Metersbonwe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Metersbonwe has no effect on the direction of Cofco Biochemical i.e., Cofco Biochemical and Shanghai Metersbonwe go up and down completely randomly.

Pair Corralation between Cofco Biochemical and Shanghai Metersbonwe

Assuming the 90 days trading horizon Cofco Biochemical Anhui is expected to under-perform the Shanghai Metersbonwe. But the stock apears to be less risky and, when comparing its historical volatility, Cofco Biochemical Anhui is 1.59 times less risky than Shanghai Metersbonwe. The stock trades about -0.01 of its potential returns per unit of risk. The Shanghai Metersbonwe FashionAccessories is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  183.00  in Shanghai Metersbonwe FashionAccessories on September 20, 2024 and sell it today you would earn a total of  58.00  from holding Shanghai Metersbonwe FashionAccessories or generate 31.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Cofco Biochemical Anhui  vs.  Shanghai Metersbonwe FashionAc

Cofco Biochemical Anhui

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cofco Biochemical Anhui are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cofco Biochemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Metersbonwe

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Metersbonwe FashionAccessories are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Metersbonwe sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cofco Biochemical and Shanghai Metersbonwe

The main advantage of trading using opposite Cofco Biochemical and Shanghai Metersbonwe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cofco Biochemical position performs unexpectedly, Shanghai Metersbonwe can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Shanghai Metersbonwe will offset losses from the drop in Shanghai Metersbonwe's long position.

The idea behind Cofco Biochemical Anhui and Shanghai Metersbonwe FashionAccessories pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.